Income Tax Bills Double!

HMRC recently released statistics on income tax and analysis of the figures showed consumers are paying huge amounts through the levy.

In light of this, guidance has been issued on how savers can reduce their income tax bills through effective use of ISAs and pensions. An examination of these figures highlighted the following:

• There were 31.6 million income taxpayers in 2018/19, and there will be 32.2 million in 2021/22, as a combination of employment and population increases alongside the freeze in the personal allowance

• In 1999/2000 we paid £93 billion in income tax. This rose to £187 billion in 2018/19 and is expected to hit £199 billion by 2021/22

• There will be 27 million basic rate taxpayers in 2021/2022, which is a 2.6% increase from 2018/2019. They will make up 83.2% of income taxpayers

• There will be 4.13 million higher rate taxpayers in 2021/2022, which is down 2.4% from 2018/2019. They will make up 13.1% of income taxpayers

• There will be 440,000 additional rate taxpayers in 2021/2022, up 10.3% from 2018/2019

So the Government is going to take £199billion of our hard-earned money in income tax in 2021/22, more than twice the sum it took in 1999/2000.

We have had a few years of more positive news for higher earners, because the personal allowance has been rising gradually, and we have seen a bump in the higher rate tax threshold too, so the proportion of people paying higher rate tax has dropped.

Unfortunately, things are set to get far grimmer for the next few years. The freeze in the personal allowance and higher rate tax threshold means more people will pay more tax, and the number of higher rate taxpayers will grow again.

By 2021/22 it will still be below its 2018/19 level, but it will soon be back over it again. And while we are happy to pay our fair share of tax, we should not pay over-the-odds.